Commentary for the Week of March 8

Silver kept the bull trend robustly alive with a spike yesterday that slightly exceeded a look-to-the-left peak at 18.585 recorded on June 1. The overshoot was just 3.5 cents, but that's plenty enough to suggest that more upside awaits following tonight's so-far gentle consolidation.  A more daunting peak at 18.815 will be today's challenge, but the futures looked to be in good shape to take it on as of around 8:25 p.m. EDT. A surge from here above $19 would provide a psychological boost as well, since it would badly compromise an all-too-clear head-and-shoulders pattern visible on the intraday charts.

Another 200-point rally in the Dow, and it’s hard to say exactly what has put Wall Street in such a giddy mood. Talk about climbing a wall of worry!   Is it perhaps the increasingly shrill warnings of an oil-induced Armageddon that have sparked a binge of contrarian buying?  Or maybe it's the gap that has begun to open up between a Europe hell-bent on “austerity” and a stimulus-addicted America about to launch yet another $50 billion jobs package?  The money managers who have been recklessly pouring O.P.M. (Other People’s Money) into stocks lately must think the dollar weakness that a tight-fisted Europe will inevitably bring about is going to boost U.S. exports -- what exports? -- and bring back prosperity. But wait, here’s another possibility:  Because Wall Street hates uncertainty more than anything else, perhaps investors are comforted by the growing certainty that our President is so utterly lacking in competence as to all but ensure a landslide victory for the Republicans in the November?  Another factor that could account for the rally is the afterglow of some recent economic data suggesting that housing, jobs and retail sales are all tanking simultaneously following a $13 trillion attempt to get the economy moving. Great!  Now the Fed can finally get serious about lowering rates below zero so that borrowers will literally get paid for doing what already comes naturally. Or so investors must think. Considering the foregoing, we needn’t have wondered why the bulls are so jazzed. In fact, their all-but-insatiable lust for shares these days only proves once again that on Wall Street, too much of a bad thing is never enough. Our Bearish Hunch For our part, we’ve been laying in a modest inventory of put options on the Diamonds as stocks have moved higher. The strategy is highly speculative, since it’s

Investors enamored of gold now have two supposed contrary indicators to worry about:  the New York Times, which did a front-page feature over the weekend on bullion’s growing popularity as an asset class; and CNBC, where a Deutsche Bank analysts on Friday predicted a $75 surge to $1300 an ounce over the next few days.  Although we've never been comfortable following recommendations aired on CNBC, the ostensible endorsement of the Gray Lady is another story. Our respect for the Times’ business section goes back to the summer of 1976, when they were the first big newspaper to notice that a small company called Resorts International had opened an office in Atlantic City.  Resorts’ common shares were selling for about $2 at the time, but – gold bugs take note – after the Times story ran in August, RTA class ‘B’ shares began a steady ascent over the next two years to around $160. So don’t think that just because gold investments have gotten front-page treatment in the New York Times that that will be the kiss of death for precious metals. The Times, after all, is not merely some upscale cousin of the mentally retarded Newsweek. And for every half-competent, politically warped bloviator like Paul Krugman who writes for the paper, there is a top-flight reporter elsewhere in the newsroom like Floyd Norris, who gets his facts straight and covers the issues of the day with the kind of balance and understanding that can truly help readers get a handle on the news. Gold Will Take No Prisoners Contrary indicators aside, our own technical runes suggest that gold’s long-term bull market remains healthy and robust but that deep-pocketed buyers are in no particular hurry to push quotes up to new levels.  Under the circumstances, we’d be surprised if the CNBC guest's

We’ve railed at traders and speculators recently for their arrogant and sometimes breathtaking stupidity in failing to discount an onslaught of world-shattering news. If the dolts, rubes, bozos and mountebanks who have kept stocks afloat even remotely understood what has been going on in this world, we wrote here recently, the Dow Industrials would plummet 6000 points in mere days.  And the news has been grave, indeed.  America’s wholly imagined economic recovery died for good on Friday with the release of shocking retail figures for May. Household incomes have been falling, consumer credit imploding, M3 plummeting, and now it turns out that corporations have allowed $1.8 trillion to sit idle in low-yielding bank accounts, hastening the economy's deflationary collapse and the onset of a Second Great Depression. We face the impossible task of getting out from beneath $130 Trillion of debt and liabilities amassed by government at all levels. The nation is adrift under a weak president whose radical politics have sharply divided the voters. Iran and Turkey (a NATO member!) have declared war on Israel, sending warships to run the Gaza blockade. Europe’s financial house of cards is within months, or even weeks, of total collapse.  The jihadists may be turning the tide against U.S. and British forces in Afghanistan. Unfortunately the list does not end there. For in fact, there is one crisis that greatly overshadows all of them:  the seabed irruption in the Gulf of Mexico. We won’t even pretend any longer that there is a market “angle” to this story.  In fact, the markets are a side show, and politics a droll burlesque, in comparison to the geophysical dreadnought taking shape in the Gulf.  Because it could eventually threaten all life on this planet, there may be no “investable issues” here. Seabed Fissures The problem is no longer a leak or a spill, you see,

If the chart below were your comatose Aunt Minnie’s EEG, her doctor might tell you it was time to pull the plug. “There’s still some electrical activity in you’re aunt’s brain,” he would explain, “but it seems highly doubtful that she will ever return to a normal and productive life.”  Just so, even if it is a stock chart that we have reproduced, not an electroencephalograph. Specifically, it is a graph of price action in the E-Mini S&Ps over the last three weeks, and it could be argued that it does indeed represent an accurate picture of brain activity – such as it is -- in the investment world. Whatever the case, there is no disputing that every little squiggle was put there by a human being, or at least by a computer programmed by a human being, and that fear and greed are manifest at each and every peak and trough. We would also note that the ups and downs traced out in this chart, although somewhat irregular, do not evince a sense of crisis or even urgency. There is just not much going on, as we can all agree.  Would it therefore surprise you to learn that the dainty little fillip toward the right-hand edge of the chart represents yesterday’s nearly 300-point rally in the Dow Industrials?  Amazing how insignificant it looks when placed in perspective. The nightly-news anchors will give this latest supposed evidence of Wall Street’s bullish mood ten seconds’ worth of spin, and then most viewers will simply shrug it off, wondering what the heck it was that investors could have been celebrating. In fact, as the chart makes clear, investors were simply continuing to do what they’ve been doing since mid-May – i.e., screwing the pooch. It’s Friday! More of the same as the

With a grave threat to world peace and stability emerging in yesterday’s news, there was the Dow Average, up 72 points at the time, as oblivious to reality as a swami who’s been in a trance for a week. Concerning the magnitude of the threat, don’t take our word for it.  Here’s a link to an article that makes clear how serious Iran is about running Israel’s blockade. Ahmadinejad has pledged warships and submarines to back up Turkey’s fleet, which at this moment is steaming toward Gaza.  The impending showdown, the Iranian president vowed, “will change many issues in the world and mark the final countdown for Israel's existence. It shows that it has no room in the region and no one is ready to live alongside it."  Does that sound like a bluff?  Contrast the palpable menace of his words with the whimsical sound bite from Hillary Clinton earlier this week when she predicted “Iran would pull some sort of stunt in the next couple of days” to divert attention from the unity with the Security Council. Are we actually supposed to believe that the U.N., which sat by idly as the mullahs went nuclear, has the will, let alone the ability, to prevent a deadly showdown between Israel and its enemies? And where is NATO when you need it? Turkey is a member, albeit one whose good standing may have been fatally compromised when the country almost overnight became a blood enemy of Israel (and therefore, of America).  One surmises that strategic alliances have shifted so rapidly in the post-American vacuum ushered in by Mr. Obama, that NATO doesn’t know where it stands. There really is no NATO any more, as this incident makes clear, and so it will be up to our President alone to put the

[Over the last three years, the Federal Reserve has conjured up trillions of dollars of funny money in an attempt to breathe some inflation back into the economy. The attempt has clearly failed. Now, it would appear, Britain has become the first country to throw in the towel on fiscal and monetary black magic. In effect, the country has decided to let deflation take its course, allowing the chips to fall where they may. In the essay below, "Cameroni," a frequent contributor to the Rick’s Picks forum, takes a close look at the decision and what it will mean not only for Britain, but the world. He concludes with a list that spells out what to expect, and the kind of pain we will experience as the world’s financial system comes very slowly back into balance in the years ahead. If his predictions are borne out, the standard of living is about to fall sharply for billions of people around the world RA] David Cameron's new Government in Britain announced Tuesday that it will introduce austerity measures to begin paying down the estimated one trillion (U.S. value) in debts held by the British Government. Lets let that sink in for a moment, for it is a stunning announcement. Now repeat it:  Britain will introduce austerity measures in order to eliminate the deficit and begin paying down the national debt. And that being said, we have just received the signal to an end to global stimulus measures -- one that puts a nail in the coffin of the debate on whether or not Britain would “print” her way out of the debt crisis. That would have virtually guaranteed an eventual hyperinflation that would have spread to all Western nations, destroying the U.S. dollar as the world’s reserve currency in the process and

Gold quotes lurched sharply higher yesterday, and we take it as especially bullish that the news media tripped over their own feet trying to explain why.  Reuters reported that prices surged because of “safe-haven demand due to ongoing fears about euro zone credit contagion.” How’s that for  lame analysis?  The Wall Street Journal didn’t do much better:  “Gold made a sudden, sharp move higher, a jump many attributed to  fears of Europe’s sovereign debt crisis.” Shouldn’t someone point out to these guys that the euro held its own yesterday for a rare change and that that is surely an odd way for traders to have expressed their supposed anxiety over Europe’s financial fate? Another talking head who apparently didn’t get it was Bart Melek, a global commodity strategist for some firm: “It’s a bizarre move,” Melek told the Journal. “Fundamentally,” he said, “we really have not seen many things today” that could justify such a big jump. Lest Melek and the others lose sleep over bullion’s vexatious vault, we’ll spell it out for them in just one word:  B-E-C-A-U-S-E!  “Because why?” Melek might ask. Just because, we’d reply, leaving it at that. Sometimes explanations need be no more complicated than that, and this is one of those times.  And anyway, anyone who still wonders why gold has taken a big leap on a given day must have been living on Mars while the yellow metal’s price quintupled from $250 to $1250 over the last ten years. They are the very same geniuses who have no difficulty explaining each and every 200-point rally in the Dow:  “The strength of the economic recovery is what did it,”  they will tell you – and never mind the fact that it is the banking sector alone that has felt any real improvement. Brace for

The mirage of economic recovery conjured up by our political leaders and a credulous news media dimmed and flickered in the harsh light of reality on Friday, when grim employment figures for May sent stocks into one of their steepest dives of the year. Although 431,000 jobs were added last month, most of the workers were census-takers hired temporarily by the government.  Even that figure evidently was ginned-up, since it appears that many of the workers had been laid off during intervals when there was little to do, only to be rehired later and recounted. But the bottom line for private-sector employment was a paltry 41,000 new hires, the smallest increase since January. Wall Street did not exactly take the news in stride, and the broad averages fell as though the data had caught most traders by surprise. Index futures had head-faked overnight to trap bulls, but by day’s end the blue chip Dow Average was down 323 points.  We would caution bears against becoming overly confident, however, since there are several technical factors coming into alignment that augur a potentially sharp reversal in the broad averages and some important trading vehicles that we track. For one, at Friday’s low of 1059, the E-Mini S&Ps was within 37 points of a longstanding “Hidden Pivot” target of ours at 1022. That’s equivalent to about 300 more points in the Dow, and it could easily be reached this week if sellers continue to hit stocks on Monday morning as they did on Friday. Bullion ‘Vulnerable’ The euro may also be close to an important turn after having been savaged since mid-April, when the currency hovered just above $1.37. On Friday, heavy selling drove it below 1.20 for the first time since 2005. The precise intraday low on the June Comex contract was